Constellation Software Inc. Announces Results for the Fourth Quarter and Year Ended December 31, 2017 and Declares Quarterly Dividend

February 14, 2018 17:00 ET | Source:Constellation Software Inc.

TORONTO, Feb. 14, 2018 (GLOBE NEWSWIRE) -- Constellation Software Inc. (TSX:CSU) (“Constellation” or the “Company”) today announced its financial results for the fourth quarter and year ended December 31, 2017 and declared a $1.00 per share dividend payable on April 5, 2018 to all common shareholders of record at close of business on March 16, 2018. This dividend has been designated as an eligible dividend for the purposes of the Income Tax Act (Canada). Please note that all dollar amounts referred to in this press release are in U.S. Dollars unless otherwise stated.

The following press release should be read in conjunction with the Company’s annual Consolidated Financial Statements, prepared in accordance with International Financial Reporting Standards (“IFRS”) and our annual Management’s Discussion and Analysis for the year ended December 31, 2017, which can be found on SEDAR at www.sedar.com and on the Company’s website www.csisoftware.com. Additional information about the Company is also available on SEDAR at www.sedar.com.

Q4 2017 Headlines:

Revenue grew 22% (8% organic growth, 5% after adjusting for changes in foreign exchange rates) to $688 million compared to $564 million in Q4 2016.

Adjusted EBITA increased $23 million or 15% to $175 million as compared to $151 million in Q4 2016.

Net income increased 16% to $76 million ($3.59 on a diluted per share basis) from $66 million ($3.10 on a diluted per share basis) in Q4 2016.

Adjusted net income increased 15% to $141 million ($6.63 on a diluted per share basis) from $122 million ($5.75 on a diluted per share basis) in Q4 2016.

A number of acquisitions were completed for aggregate cash consideration of $84 million (which includes acquired cash). Deferred payments associated with these acquisitions have an estimated value of $22 million resulting in total consideration of $106 million.

Cash flows from operations were $163 million, an increase of 22%, or $29 million, compared to $134 million for the comparable period in 2016.

Subsequent to December 31, 2017, the Company completed a number of acquisitions for aggregate cash consideration of $278 million (which includes acquired cash). Deferred payments associated with these acquisitions have an estimated value of $42 million resulting in total consideration of $320 million.

Subsequent to February 14, 2018 the Company policy will be to only issue press releases for acquisitions having an aggregate purchase price of $50 million or more.

2017 Headlines:

Revenue grew 17% (3% organic growth, 3% after adjusting for changes in foreign exchange rates) to $2,479 million compared to $2,125 million in 2016.

Adjusted EBITA increased $91 million or 17% to $621 million as compared to $530 million in 2016.

Net income increased 7% to $222 million ($10.47 on a diluted per share basis) from $207 million ($9.76 on a diluted per share basis) in 2016.

Adjusted net income increased 17% to $463 million ($21.84 on a diluted per share basis) from $395 million ($18.64 on a diluted per share basis) in 2016.

A number of acquisitions were completed for aggregate cash consideration of $269 million (which includes acquired cash). Deferred payments associated with these acquisitions have an estimated value of $60 million resulting in total consideration of $329 million.

Cash flows from operations were $528 million, an increase of 8%, or $37 million, compared to $491 million for the comparable period in 2016.

Total revenue for the quarter ended December 31, 2017 was $688 million, an increase of 22%, or $124 million, compared to $564 million for the comparable period in 2016. For the year ended December 31, 2017 total revenues were $2,479 million, an increase of 17%, or $354 million, compared to $2,125 million for the comparable period in 2016. The increase for both the three and twelve month periods ended December 31, 2017 is primarily attributable to growth from acquisitions as the Company experienced organic growth of 8% and 3% respectively, 5% and 3% respectively after adjusting for the impact of changes in the valuation of the US dollar against most major currencies in which the Company transacts business.

For the quarter ended December 31, 2017, Adjusted EBITA increased to $175 million compared to $151 million for the same period in 2016 representing an increase of 15%. Adjusted EBITA margin was 25% for the quarter ended December 31, 2017 and 27% for the same period in 2016. For the year ended December 31, 2017, Adjusted EBITA increased to $621 million compared to $530 million during the same period in 2016, representing an increase of 17%. Adjusted EBITA margin was 25% for both the years ended December 31, 2017 and 2016.

Net income for the quarter ended December 31, 2017 was $76 million compared to net income of $66 million for the same period in 2016. On a per share basis this translated into a net income per diluted share of $3.59 in the quarter ended December 31, 2017 compared to net income per diluted share of $3.10 for the same period in 2016. For the year ended December 31, 2017, net income was $222 million or $10.47 per diluted share compared to $207 million or $9.76 per diluted share for the same period in 2016.

For the quarter ended December 31, 2017, Adjusted net income increased to $141 million from $122 million for the same period in 2016, representing an increase of 15%. Adjusted net income margin was 20% for the quarter ended December 31, 2017 and 22% for the same period in 2016. For the year ended December 31, 2017, Adjusted net income increased to $463 million from $395 million during the same period in 2016, representing an increase of 17%. Adjusted net income margin was 19% for both the years ended December 31, 2017 and 2016.

Cash flows from operations for the quarter ended December 31, 2017 were $163 million, an increase of 22%, or $29 million, compared to $134 million for the comparable period in 2016. Cash flows from operations for the year ended December 31, 2017 were $528 million, an increase of 8%, or $37 million, compared to $491 million for the comparable period in 2016.

The following table displays our revenue by reportable segment and the percentage change for the three and twelve month periods ended December 31, 2017 compared to the same periods in 2016:

Three months endedDecember 31,

Period-Over-Period Change

OrganicGrowth

Year endedDecember 31,

Period-Over-Period Change

OrganicGrowth

2017

2016

$

%

%

2017

2016

$

%

%

($M, except percentages)

($M, except percentages)

Public Sector

Licenses

32

25

7

27

%

3

%

107

88

19

22

%

-6

%

Professional services

112

94

18

19

%

7

%

398

344

54

16

%

3

%

Hardware and other

43

32

10

32

%

21

%

139

120

18

15

%

8

%

Maintenance and other recurring

287

232

54

23

%

7

%

1,046

876

170

19

%

4

%

473

384

89

23

%

8

%

1,689

1,428

261

18

%

4

%

Private Sector

Licenses

18

14

4

26

%

14

%

64

55

9

16

%

5

%

Professional services

28

23

5

21

%

9

%

100

90

10

11

%

1

%

Hardware and other

8

6

1

22

%

-3

%

29

27

2

6

%

-7

%

Maintenance and other recurring

161

136

25

18

%

6

%

598

524

73

14

%

4

%

215

180

35

19

%

7

%

790

697

93

13

%

3

%

Certain totals and percentages may not reconcile due to rounding.

For purposes of calculating organic growth, estimated pre-acquisition revenue from the relevant companies acquired in 2016 and 2017 was added to actual reported revenue for the three and twelve month periods ended December 31, 2017.

Public Sector

For the quarter ended December 31, 2017, total revenue in the public sector reportable segment increased 23%, or $89 million to $473 million, compared to $384 million for the quarter ended December 31, 2016. For the year ended December 31, 2017, total revenue increased by 18%, or $261 million to $1,689 million, compared to $1,428 million for the comparable period in 2017. Organic revenue growth was 8% and 4% respectively for the three and twelve month periods ended December 31, 2017 compared to the same periods in 2016, and 5% and 3% respectively after adjusting for the impact of changes in the valuation of the US dollar against most major currencies in which the Company transacts business.

Private Sector

For the quarter ended December 31, 2017, total revenue in the private sector reportable segment increased 19%, or $35 million to $215 million, compared to $180 million for the quarter ended December 31, 2016. For the year ended December 31, 2017, total revenue increased by 13%, or $94 million to $790 million, compared to $697 million for the comparable period in 2016. Organic revenue growth was 7% and 3% respectively for the three and twelve month periods ended December 31, 2017 compared to the same periods in 2016, and 5% and 3% respectively after adjusting for the impact of changes in the valuation of the US dollar against most major currencies in which the Company transacts business.

Conference Call and WebcastManagement will host a conference call at 8:00 a.m. (ET) on Thursday, February 15, 2018 to answer questions regarding the results. The teleconference numbers are 647-788-4919 or 877-291-4570. The call will also be webcast live and archived on Constellation’s website at www.csisoftware.com.

A replay of the conference call will be available as of 12:30 p.m. ET the same day until 11:59 p.m. ET on March 1, 2018. To access the replay, please dial 416-621-4642 or 800-585-8367 followed by the passcode 2869957.

Forward Looking Statements

Certain statements herein may be “forward looking” statements that involve known and unknown risks, uncertainties and other factors that may cause the actual results, performance or achievements of Constellation or the industry to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Forward looking statements involve significant risks and uncertainties, should not be read as guarantees of future performance or results, and will not necessarily be accurate indications of whether or not such results will be achieved. A number of factors could cause actual results to vary significantly from the results discussed in the forward looking statements. These forward looking statements reflect current assumptions and expectations regarding future events and operating performance and are made as of the date hereof and Constellation assumes no obligation, except as required by law, to update any forward looking statements to reflect new events or circumstances

Non-IFRS Measures

The term ‘‘Adjusted EBITA’’ refers to net income before adjusting for finance and other income, bargain purchase gain, finance costs, income taxes, share in net income or loss of equity investees, impairment of non-financial assets, amortization, TSS membership liability revaluation charge, and foreign exchange gain or loss. The Company believes that Adjusted EBITA is useful supplemental information as it provides an indication of the results generated by the Company’s main business activities prior to taking into consideration how those activities are financed and taxed and also prior to taking into consideration intangible asset amortization and the other items listed above. ‘‘Adjusted EBITA margin’’ refers to the percentage that Adjusted EBITA for any period represents as a portion of total revenue for that period.

‘‘Adjusted net income’’ means net income adjusted for non-cash expenses (income) such as amortization of intangible assets, deferred income taxes, the TSS membership liability revaluation charge, and certain other expenses (income), and excludes the portion of the adjusted net income of Total Specific Solutions (TSS) B.V. (“TSS”) attributable to the minority owners of TSS. The Company believes that Adjusted net income is useful supplemental information as it provides an indication of the results generated by the Company’s main business activities prior to taking into consideration amortization of intangible assets, deferred income taxes, the TSS membership liability revaluation charge, and certain other non-cash expenses (income) incurred or recognized by the Company from time to time, and adjusts for the portion of TSS’ Adjusted net income not attributable to shareholders of Constellation. ‘‘Adjusted net income margin’’ refers to the percentage that Adjusted net income for any period represents as a portion of total revenue for that period.

Adjusted EBITA and Adjusted net income are not recognized measures under IFRS and, accordingly, readers are cautioned that Adjusted EBITA and Adjusted net income should not be construed as alternatives to net income determined in accordance with IFRS. The Company’s method of calculating Adjusted EBITA and Adjusted net income may differ from other issuers and, accordingly, Adjusted EBITA and Adjusted net income may not be comparable to similar measures presented by other issuers. Adjusted EBITA includes 100% of the Adjusted EBITA of TSS.

The following table reconciles Adjusted EBITA to net income:

Three months endedDecember 31,

Year endedDecember 31,

2017

2016

2017

2016

($M, except percentages)

($M, except percentages)

Total revenue

688

564

2,479

2,125

Net income

76

66

222

207

Adjusted for:

Income tax expense (recovery)

30

20

99

80

Foreign exchange (gain) loss

(2

)

1

9

26

TSS membership liability revaluation charge

10

8

50

22

Share in net (income) loss of equity investees

(0

)

0

(0

)

(5

)

Finance and other income

(1

)

(8

)

(3

)

(11

)

Bargain purchase gain

(5

)

-

(10

)

-

Finance costs

5

5

25

22

Amortization of intangible assets

63

59

230

191

Adjusted EBITA

175

151

621

530

Adjusted EBITA margin

25

%

27

%

25

%

25

%

Certain totals and percentages may not reconcile due to rounding.

The following table reconciles Adjusted net income to net income:

Three months endedDecember 31,

Year endedDecember 31,

2017

2016

2017

2016

($M, except percentages)

($M, except percentages)

Total revenue

688

564

2,479

2,125

Net income

76

66

222

207

Adjusted for:

Amortization of intangible assets

63

59

230

191

TSS membership liability revaluation charge

10

8

50

22

Bargain purchase gain

(5

)

-

(10

)

-

Less non-controlling interest in the Adjusted

net income of TSS

(6

)

(5

)

(22

)

(19

)

Deferred income tax expense (recovery)

3

(5

)

(8

)

(5

)

Adjusted net income

141

122

463

395

Adjusted net income margin

20

%

22

%

19

%

19

%

Certain totals and percentages may not reconcile due to rounding.

About Constellation Software Inc.

Constellation's common shares are listed on the Toronto Stock Exchange under the symbol "CSU". Constellation acquires, manages and builds vertical market software businesses.

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